State’s federal stimulus czar did poor job managing funds

The Illinois Department of Commerce and Economic Opportunity (DCEO), which leads
the state’s business development efforts, appears to have been poorly managed during the
tenure of the agency’s former director Jack Lavin, according to reviews of DCEO operations by state
and federal authorities.

Despite this track record, Gov. Pat Quinn chose Lavin, appointed to head DCEO in
2003 by former Gov. Rod Blagojevich, as his chief operating officer and
overseer of the state’s stimulus efforts when Quinn assumed the governorship in January.

On May 28, the office of Auditor General William Holland released a compliance
examination of a two-year period ending on June 30, 2008, showing that DCEO
under Lavin did not adequately monitor its grantees, failed to properly
document overseas travel expenses that exceeded the amount approved by the
Governor’s Travel Control Board (GTCB), entered into a contract that circumvents
established appropriations processes, and submitted dozens of required reports
late.

According to the report, the DCEO-run Illinois Board of Transportation
contracted with Tucson, Ariz.-based Madden Preprint Media to publish the state’s 2007 and 2008 travel guides. Under the agreement, the publisher would be paid
$200,000 upfront then be allowed to keep the first $200,000 in advertising
sales. In addition, the contract permits the firm to retain sales over $300,000
minus royalties paid to the state. However, DCEO “has no statutory authority to allow a vendor to withhold any funds collected on
its behalf,” auditors stated.

In addition, state auditors reviewed employee travel vouchers and found the
amount reimbursed for seven trips to India, Germany, China, and Hong Kong
exceeded approved rates by $2,792.03. Auditors were unable to determine whether
“sufficient effort was made in obtaining the lowest rate available” but could not “presume whether the actual rates incurred would have been considered ‘excessive’ by the GTCB.”

DCEO officials agreed with all findings and indicated it would review the travel
guide contract as well as revise the agency’s travel and documentation policy, including improved documentation of obtaining
the lowest hotel rate available.

A separate evaluation of federal grant programs administered by the DCEO found
several discrepancies similar to those uncovered by state auditors.

In 2008, the U.S. Department of Labor, Employment and Training Administration
also reviewed the agency’s administration of two components of the federal Workforce Investment Act,
through which DCEO provides sub-grants for jobs programs throughout the state.

In a review of sub-grants awarded between July 1, 2004, and Dec. 31, 2007, the
federal labor department said DCEO does not comply with federal requirements
regarding full and open competition with respect to the awarding of grants,
circumvents state procurement regulations by using grant agreements instead of
contracts, improperly used the “sole source method” to select and award several purchase agreements, and failed to document costs
associated with some grants.

The labor department monitors also found that DCEO officials failed to prevent
or mitigate an apparent conflict of interest involving a senior-level DCEO
manager whose spouse receives a DCEO sub-grant through the University of
Illinois.

Taken together, the reports raise questions about Lavin’s ability to oversee the estimated $22.7 billion Illinois is expected to receive
from the stimulus program, much of which will pass through state agencies like
the DCEO and be dispersed to local entities in the form of sub-grants.

Approximately $1.1 billion worth of projects funded by American Recovery and
Reinvestment Act, passed by Congress and signed into law by President Barack
Obama in February, are already underway in Illinois.

Before joining the Blagojevich administration, Lavin served as chief-financial
officer for Rezko Enterprises — the company owned by Blagojevich fundraiser Antoin “Tony” Rezko, who was convicted on federal corruption charges last year — as well as Quinn’s chief of staff when Quinn held the state treasurer’s post in the early 1990s.